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China found to be Illegally Hoarding up on Minerals by WTO

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China has come under a lot of fire for its protectionist trade policies from multinational corporations like Siemens,GE,Google as well as its major trading partners.One of the bones of contention is its export restrictions on crucial minerals like zinc,lead,cadmium, gold, indium, iron ore, lime, lead, manganese, mercury, molybdenum, phosphate, salt, tin, tungsten, vanadium and zinc.China is surprisingly the biggest producer of these minerals and has been hoarding these minerals.Note China is the biggest importer of minerals like copper,coal,iron ore etc. so its hoarding is surprising.This action by China came under the scanner when it restricted the export of rare earth minerals over a small dispute with Japan.This resulted in alarm bells ringing in Europe,USA and Japan.These countries scurried for alternative sources of these crucial REE in other places as China controlled more than 95% of the world’s supply.

Now WTO is set to rule against China for its policies on these minerals through which it encourages the growth of local industry.China has claimed environment destruction as the reason for restricting exports of minerals.However that does not explain why it continues to produce the minerals as they should logically curtail production .This results in discrimination against foreign users and refiners of minerals.It will be interesting to watch how China responds to this WTO ruling.Note China is already facing a huge problem with most of its trading partners accusing it of currency manipulation.

Trade Judges See Flaw in China Policies

The World Trade Organization on Friday will issue a preliminary report concluding that China has no legal right to impose export restrictions on nine raw materials, say trade diplomats and lawyers familiar with the case.

The quotas, license requirements and other measures on industrial ingredients such as zinc and coke, many vital for making steel, have been a key irritant in China’s simmering trade tensions with trading partners.

The U.S. and other complainants in the raw-materials case alleged that quotas and other measures were a protectionist move that illegally keeps prices high and discriminates against other nations. Buyers of raw materials were also upset. Because of China, “they have no influence on 75% of their input cost,” says Christian Obst, a Munich-based analyst at UniCredit Bank, who covers steelmakers such as ThyssenKrupp AG. China’s main goal, he adds, “is self-sufficiency.”

For now, however, the restrictions appear to have remained in place. For the first half of 2011, China has licensed only 32 companies to export rare earths, compared with 47 in 2006. It also cut the quota to 14,508 metric tons for the first half of 2011, down 35% from the period in 2010.


Abhishek Shah

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